IDEAS home Printed from https://ideas.repec.org/a/kap/jfsres/v42y2012i3p159-185.html
   My bibliography  Save this article

Does Surplus Participation Reflect Market Discipline? An Analysis of the German Life Insurance Market

Author

Listed:
  • Martin Eling

    ()

  • Dieter Kiesenbauer

    ()

Abstract

The aim of this paper is to analyze whether the level of surplus participation affects customer demand. We use multivariate linear regression models and data on surplus participation, new business, and lapse for the German life insurance market from 1998 to 2008. We find a significant positive dependence between surplus participation and new business growth as well as a significant negative dependence between surplus participation and growth of lapse volume. Overall, these findings indicate that customers do react to changes in product characteristics, which might be seen as indicative of market discipline. Our results are important for insurance company managers, regulators, and boards of insurance associations. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Martin Eling & Dieter Kiesenbauer, 2012. "Does Surplus Participation Reflect Market Discipline? An Analysis of the German Life Insurance Market," Journal of Financial Services Research, Springer;Western Finance Association, vol. 42(3), pages 159-185, December.
  • Handle: RePEc:kap:jfsres:v:42:y:2012:i:3:p:159-185
    DOI: 10.1007/s10693-011-0113-z
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10693-011-0113-z
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Sironi, Andrea, 2003. " Testing for Market Discipline in the European Banking Industry: Evidence from Subordinated Debt Issues," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(3), pages 443-472, June.
    2. Donald Morgan & Kevin Stiroh, 2001. "Market Discipline of Banks: The Asset Test," Journal of Financial Services Research, Springer;Western Finance Association, vol. 20(2), pages 195-208, October.
    3. Donghui Li & Fariborz Moshirian & Pascal Nguyen & Timothy Wee, 2007. "The Demand for Life Insurance in OECD Countries," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(3), pages 637-652.
    4. Thomas Mondschean & Timothy Opiela, 1999. "Bank Time Deposit Rates and Market Discipline in Poland: The Impact of State Ownership and Deposit Insurance Reform," Journal of Financial Services Research, Springer;Western Finance Association, vol. 15(3), pages 179-196, May.
    5. Isabelle Distinguin & Philippe Rous & Amine Tarazi, 2006. "Market Discipline and the Use of Stock Market Data to Predict Bank Financial Distress," Journal of Financial Services Research, Springer;Western Finance Association, vol. 30(2), pages 151-176, October.
    6. Weiyu Kuo & Chenghsien Tsai & Wei-Kuang Chen, 2003. "An Empirical Study on the Lapse Rate: The Cointegration Approach," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(3), pages 489-508.
    7. Epermanis, Karen & Harrington, Scott E., 2006. "Market Discipline in Property/Casualty Insurance: Evidence from Premium Growth Surrounding Changes in Financial Strength Ratings," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(6), pages 1515-1544, September.
    8. Kolkiewicz, A. W. & Tan, K. S., 2006. "Unit-Linked Life Insurance Contracts with Lapse Rates Dependent on Economic Factors," Annals of Actuarial Science, Cambridge University Press, vol. 1(01), pages 49-78, March.
    9. Hall, Bronwyn H, 1987. "The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 583-606, June.
    10. Consiglio, Andrea & Cocco, Flavio & Zenios, Stavros A., 2008. "Asset and liability modelling for participating policies with guarantees," European Journal of Operational Research, Elsevier, vol. 186(1), pages 380-404, April.
    11. Yuliang Wu & Michael Bowe, 2010. "Information Disclosure, Market Discipline and the Management of Bank Capital: Evidence from the Chinese Financial Sector," Journal of Financial Services Research, Springer;Western Finance Association, vol. 38(2), pages 159-186, December.
    12. Nadine Gatzert & Gudrun Hoermann & Hato Schmeiser, 2009. "The Impact of the Secondary Market on Life Insurers' Surrender Profits," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(4), pages 887-908.
    13. Giovanni Millo & Gaetano Carmeci, 2011. "Non-life insurance consumption in Italy: a sub-regional panel data analysis," Journal of Geographical Systems, Springer, vol. 13(3), pages 273-298, September.
    14. J. Cummins & Neil Doherty, 2002. "Capitalization of the Property-Liability Insurance Industry: Overview," Journal of Financial Services Research, Springer;Western Finance Association, vol. 21(1), pages 5-14, February.
    15. Michael M. Barth & David L. Eckles, 2009. "An Empirical Investigation of the Effect of Growth on Short-Term Changes in Loss Ratios," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(4), pages 867-885.
    16. Mark Flannery, 2001. "The Faces of “Market Discipline”," Journal of Financial Services Research, Springer;Western Finance Association, vol. 20(2), pages 107-119, October.
    17. Scott Harrington & Greg Niehaus, 2002. "Capital Structure Decisions in the Insurance Industry: Stocks versus Mutuals," Journal of Financial Services Research, Springer;Western Finance Association, vol. 21(1), pages 145-163, February.
    18. Steven Pottier & David Sommer, 2002. "The Effectiveness of Public and Private Sector Summary Risk Measures in Predicting Insurer Insolvencies," Journal of Financial Services Research, Springer;Western Finance Association, vol. 21(1), pages 101-116, February.
    19. Nadine Gatzert & Hato Schmeiser, 2008. "Assessing the Risk Potential of Premium Payment Options in Participating Life Insurance Contracts," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(3), pages 691-712.
    20. Avery, Robert B & Belton, Terrence M & Goldberg, Michael A, 1988. "Market Discipline in Regulating Bank Risk: New Evidence from the Capital Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(4), pages 597-610, November.
    21. Laura Ballotta & Steven Haberman & Nan Wang, 2006. "Guarantees in With-Profit and Unitized With-Profit Life Insurance Contracts: Fair Valuation Problem in Presence of the Default Option," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(1), pages 97-121.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marcos Escobar & Mikhail Krayzler & Franz Ramsauer & David Saunders & Rudi Zagst, 2016. "Incorporation of Stochastic Policyholder Behavior in Analytical Pricing of GMABs and GMDBs," Risks, MDPI, Open Access Journal, vol. 4(4), pages 1-36, November.

    More about this item

    Keywords

    Regulation; Market discipline; Life insurance; Surplus participation; New business growth; Lapse; G22; G28; G38;

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jfsres:v:42:y:2012:i:3:p:159-185. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.